Mortgage Lender First Magnus Files Chapter 11

Reuters

Wednesday, 22 Aug 2007 | 12:48 AM ETReuters

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First Magnus Financial, one of the largest independent U.S. mortgage lenders, filed for Chapter 11 bankruptcy protection on Tuesday, the latest home loan provider to collapse as the housing market slumps and credit crisis widens.

The privately-held company, based in Tucson, Arizona, filed less than a week after it stopped funding home loans and taking loan applications. It said it laid off most of its nearly 6,000 employees on Thursday, leaving about 60 workers.

"We are saddened that First Magnus has been placed in this situation by the extensive and sudden liquidity crisis in the secondary mortgage market," Chief Executive G.S. Jaggi said in a statement.

In its petition filed with the U.S. bankruptcy court in Tucson, First Magnus listed $942.1 million of assets and $812.5 million of liabilities as of May 31. It also listed between 25,001 and 50,000 creditors. The company did not immediately list its largest unsecured creditors.

First Magnus was the 16th-largest U.S. mortgage lender from January to June, originating $17.1 billion of home loans, according to the newsletter Inside Mortgage Finance.

Founded in 1996, the company operated in all 50 U.S. states and ran more than 300 offices.

First Magnus said it planned to wind down operations.

Dozens of mortgage lenders have quit the industry this year as delinquencies and foreclosures rose, mortgage rates were reset higher, and housing price appreciation slowed. Capital markets have tightened, depriving lenders of needed cash as investors grow unwilling to buy loans once thought safe.

Another independent mortgage provider, American Home Mortgage Investment, had been the 10th-largest lender before filing for bankruptcy protection on Aug. 6. It is also liquidating.

MCA Financial Group and the law firm Greenberg Traurig LLP are advising First Magnus on its bankruptcy, the company said.